Having debt trouble? Keep your financial paperwork! You will need it if you ever want to defend yourself against debts or eventually have to file bankruptcy. We need to know all the debts you owe or might possibly owe in order to put a case together for you — and it can be costly to leave things out.
That seems like common sense, right? But common sense often has little to do with our response to a crisis or a setback. Instinct takes over and we make mistakes. One mistake we often make as we get into deeper debt is to stop looking at the bills and notices. It’s stressful enough to have debt collectors calling, so we stop reading or keeping the bills and notices just to stay sane. If you can’t pay it, even opening the envelope hurts a bit.
But if you don’t read and keep the notices and bills, it is much harder for someone else to get help. Bankruptcy lawyers see this all the time: Folks come in to and have no real idea who they owe now, how much, or what for. These are perfectly normal people who are just pushed to the limits of their mental health and gave up keeping their bills.
Often folks think it’s OK because there’s a record somewhere of everything they owe. But if there is some Great Computer that has all this information in it, the NSA is not letting bankruptcy lawyers get at it!
There are services that allow us to access your credit reports, with your consent. And you can have free copies of your credit report each year too. But your credit report is not going to help us very much in building your case for you.
Some lenders do not report to credit bureaus — possibly so you can’t rebuild credit and shop for better loans! — so those debts won’t be on the reports. Some debt may be too old to appear on your report — but still be a debt you owe. Some is just not the type of thing that pops up on credit reports — like a debt for damage to a neighbor’s car or money you owe a friend. And some debt on a report could belong to someone else but appear on your report by mistake. Mistakes on credit reports happen a lot more than they want to admit. A credit report will only tell us what some creditors, possibly yours, claim you owe them — not every creditor or potential creditor you could owe.
If you don’t list some of your debt in your case even by accident, it can be harmful to your financial health. In the simplest cases, it just means you have to spend more in attorney fees and court filing fees to fix the paperwork filed in your case. But in extreme cases — particularly cases where some money is paid into the bankruptcy trustee’s hands from your assets or your payment plan — then the unlisted debts may not be wiped out at the end of a successful case.
So even if it is physically painful to keep the bills and threatening notices from creditors, do it anyway. Don’t put your faith in the Great Mythic Computer to save you otherwise.
Photo courtesy: Wikimedia/CER12rt
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Last modified: January 25, 2013